The developing countries of the Middle East and North Africa1 region are experiencing a recovery in 2014, following a 0.1 percent contraction in 2013, on the back of domestic and regional turmoil and weak external demand. Recovery in oil production, industrial activity and exports is contributing to the pick-up in growth this year. This modest upturn, however, remains fragile and well below the region’s potential as structural reforms needed to spur growth, lower unemployment and alleviate poverty remain unaddressed. Security challenges in several countries are a key source of instability. Fiscal and external accounts remain weak and are benefiting from the exceptional official support from the high-income Gulf Co-operation Council (GCC) countries.
In oil-importing developing countries, economic activity is stabilizing, but the recovery remains fragile. Strong growth in the first half of 2013 was offset by a sharp drop in the second half such that growth in oil-importers rose, on average, by just 0.2 percentage points to 2.7 percent in 2013. Exports in several Mediterranean economies are rebounding due to the recovery in the Euro Area during Q1 2014. While activity has picked up from low levels in Egypt, in Lebanon spillovers from the conflict in Syria continue to depress activity, exports and sentiment.
In oil-exporting developing countries, growth has been highly volatile, with GDP contracting by 1.8 percent in 2013, reflecting production setbacks in Libya and Iraq, sanctions in Iran, and civil war in Syria. However, oil output now appears to be recovering, averaging 7.7 million barrels per day (mb/d) in Q1 2014, due to rebounding production in Iraq, the region’s largest producer. However, output is still below the 2013 average and the pre-Arab Spring average.
1. The developing Middle East and North Africa region includes 13 low and middle-income countries with income of less than $12,276 GNI-per capita in 2010. High-income Gulf Cooperation Council (GCC) countries are excluded. The developing countries are divided into two groups; oil importers and oil exporters. Developing oil importers are: Djibouti, Arab Republic of Egypt, Jordan, Lebanon, Morocco, Tunisia, and West Bank and Gaza. Developing oil exporters are: Algeria, the Islamic Republic of Iran, Iraq, Libya, the Syrian Arab Republic, and the Republic of Yemen.